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Businesses In San Diego's Majority White Communities Received By Far The Most PPP Loans

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In some white and wealthy Census tracts, upwards of 99% of businesses got federal Paycheck Protection Program (PPP) loans. Meanwhile, in some low-income minority tracts, fewer than 5% received funds.

Speaker 1: 00:00 A centerpiece of the federal government's response to the pandemic was a massive cash infusion for businesses called the paycheck protection program or PPP, but KPBS, investigative reporter, Claire Traeger says there was vast disparity in how that money was given out in San Diego and elsewhere favoring wealthy and white areas.

Speaker 2: 00:21 The Corona family had long dreamed of opening a Mexican restaurant in their hometown of Imperial beach. And in early 2020, they were on their way. Then came the pandemic.

Speaker 3: 00:33 When we were getting ready to open, it was already, you know, everything was closed and everything was completely different for us.

Speaker 2: 00:40 Tonya Corona opened for takeout orders in April, but still struggled to make rent. So when the federal paycheck protection program or PPP was announced, Corona immediately went to her bank to try to get funding.

Speaker 3: 00:53 And they said, I, I wouldn't, I didn't qualify for the one they were offering because my business was so new.

Speaker 2: 00:58 The Corona family story is one that became all too common in San Diego County and throughout the country during 2020, a half a trillion in federal dollars were sloshing through the economy through the program. But relatively few were ending up in the pockets of business owners in underserved places like Imperial beach. The primary reason for this inequity is that PPP loans were distributed by banks and many small minority owned businesses, lack existing banking. Relationships says Mark Herbert, a small business advocate when you build a program and just bolt it on top of our existing commercial financing system, it's going to exacerbate the problems that had already existed even before the pandemic. The data show vast inequity in San Diego County lenders gave 61% of loans to businesses in majority white census tracks and just under 12% to businesses in majority Latin X census tracks. So, yeah, we've been in business for eight years.

Speaker 2: 02:04 Well, Corona was barely hanging on an Imperial beach. Molly Boyd, the owner of Brill hair lounge in Carlsbad was facing her own crisis in March, 2020. She like hairstylists everywhere had to close her salon. Her clients didn't take it. Well, everybody started panicking, not only like health wise, but like I have to look good. I mean, we are in California. She also applied for a PPP loan from her usual bank and was put on a waiting list. Her friends told her about a bank that had no waiting list and she quickly got funding, but Boyd doesn't see inequity in the process you didn't put in the time and the work and the extra that you needed to in order to stay afloat. Then you're just going to, again, you're just complaining. It's hard to say like, Oh, you didn't have internet. Like it's, it's 2021. Like everybody has internet and it'd be dope. Then he better get a new phone.

Speaker 4: 03:01 A lot of individuals don't have wifi. They don't have a computer. They don't have a tablet. Yeah.

Speaker 2: 03:06 Imperial beach, Councilman Matthew Labour Gonzalez represents the area that got the lowest rate of loans. He says the challenges go beyond internet connections and phones. Many have few, if any employees and their prior experiences with banks and other lenders have been more negative than positive.

Speaker 4: 03:25 Some of the individuals may have, um, felt a little, you know, inferior. As far as applying

Speaker 2: 03:32 In recent months, the federal government has tried to give out money more equitably, including setting aside a two week period where only small businesses in low-income areas can apply. But in the meantime, business owners like Corona in Imperial beach are looking to the future and hoping for a recovery that will keep them afloat. Right now, she works another full-time job while running the restaurant and taking care of her kids.

Speaker 4: 03:59 We have good days and bad days, I think more, better than good. Right now

Speaker 2: 04:03 She's getting ready to open for in-person dining in the next few weeks and hopes new customers will come to sample her dad's specialty.

Speaker 4: 04:13 Good.

Speaker 2: 04:15 And then Sue Claire tracer KPBS news

Speaker 1: 04:19 To use our searchable map to see what areas of San Diego got the most loans go to And for more on this story, Maureen Kavanaugh spoke with KPBS, investigative reporter, Claire Tresor here's that interview.

Speaker 5: 04:35 You say that one of the problems with getting a PPP loan for minority owned small businesses is that fewer of them have relationships with banks. I'm wondering why is that?

Speaker 2: 04:47 Well, this is actually something that I covered in the past pre pandemic, um, in a story that I did a few years ago, I found that between 2012 and 2016, only about one in five businesses in low-income areas of San Diego County received a bank loan compared to almost four in five businesses in high-income areas. And when I did the story, I found there were multiple reasons for this from bad credit to maybe a business owner, having fewer assets, um, and concerns from banks about lower profits in lower income neighborhoods. But also at the time I spoke with business owners in areas like city Heights, who didn't even actually try to get alone. And that was because of fears or, you know, stigma about going into debt.

Speaker 5: 05:37 Okay. So could it be that one reason fewer loans went to minority communities is because many of the businesses in those communities are family run or are too small to have employees, the PPP loans were geared toward payroll protection for employees, right?

Speaker 2: 05:55 Yeah, that's right. Um, and, and that could be part of the reason the loans say that 60% have to go to covering paychecks, but that can still include yourself or family members, but for people who are sole proprietors, I think some of them thought that it would be better to just shut down the business and go on unemployment, especially early on when they were offering those, uh, big checks for unemployment. But I also spoke with a tax accountant in Imperial beach, who said, some of his clients really did want to apply for a loan to keep their business going, but because they were maybe gig workers or were paid in cash, um, they didn't always have the necessary documentation

Speaker 5: 06:37 With fewer businesses getting PPP loans in minority communities did more businesses fail in those areas than in majority white districts.

Speaker 2: 06:48 Well, you know, this is something that I would love to know. Uh, I'm I've been working on this, trying to find out exactly how many businesses closed during the pandemic. You would think that that would be an easy question. It's a bit of a complicated question. So kind of stay tuned on that in the story here, we're talking about the actual rate of percentage of businesses that got loans. So using both census data and post office data compiled by the nonprofit news organization reveal, we had an estimate of the total number of eligible businesses in each census tract. And then we looked at the percentage of those businesses that got loans. So for example, in the Imperial beach census track that I referenced in the story, there were 142 eligible businesses, according to Reveal's data. And only six of them got loans.

Speaker 5: 07:38 You know, what I was thinking during your report is where was say the Imperial beach chamber of commerce on giving advice about PPP loans or the San Ysidro chamber, or even the San Diego chamber of commerce, aren't those organizations supposed to help the business community?

Speaker 2: 07:58 Well, yeah, I think it's important to remember that Imperial beach does have its own chamber of commerce organization, but it's not nearly as robust as the San Diego chamber of commerce. It's run by people who also have other full-time jobs. I did reach out to the Imperial beach chamber of commerce, but wasn't able to connect with anyone for an interview. As I referenced in the story, there were elected officials in Imperial beach who are trying to do some outreach. There was the Councilman for the area and the mayor who are going around to businesses and handing out flyers, trying to alert them about the loans. Um, and then I spoke with a tax accountant who I referenced earlier and he was basically doing free work, trying to help business owners submit their applications.

Speaker 5: 08:44 So here we are. Now there's another round of PPP loans available. How has the distribution of this funding different?

Speaker 2: 08:51 Right? So there is this round of loans that businesses can for now. And I spoke with a small business administration, who's overseeing the program and they said, they're trying to make changes to improve equity in those loans, including setting aside a two week period where only small businesses in low income areas, or with less than 100 employees can apply. Um, and then they've authorized more institutions such as credit bureaus and farming agencies to give out loans. Um, and they also have additional grants going on right now as well, such as a restaurant relief fund and grants for businesses that have closed.

Speaker 5: 09:30 And has any agency giving small business owners better guidance on how this new program works?

Speaker 2: 09:36 Well, one thing that's interesting is if you look at, uh, areas like city Heights, which are again, you know, a lower income area, um, majority non-white census tracks, but there are so many agencies and groups set up there like city Heights, business associations who are helping businesses. And so there, you actually see that the loan rate is better. It's still not, you know, the 99% that you see in some North County places, but it's more like 18 or 20% of eligible businesses were able to get loans, which is a big gap from places like skyline or, uh, Imperial beach, as we mentioned. So I think it's more about being in the individual neighborhood and what are the resources there?

Speaker 5: 10:21 I want to thank KPBS investigative reporter, Claire Traeger, sir. Thank you so much. Thank you.

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Maureen Cavanaugh and Jade Hindmon host KPBS Midday Edition, a daily radio news magazine keeping San Diego in the know on everything from politics to the arts.